Things to Consider Before Borrowing Money

Some would argue that borrowing money is easier than it used to be, whereas others could argue that it is, in fact, much harder. Age and credit rating will probably be very different between the people who have these opinions, as lending in the distant past compared to lending now is very different indeed. Nowadays, your credit rating has a lot of power over whether a lender is happy to advance money to you or not. Whichever camp you’re in, you should not take borrowing for granted too much. Many people see debt as a normal state to be in – buying furniture on finance, having a large mortgage, using a credit card regularly…there are a variety of debts out there and some people have more than others. No matter how ‘normal’ debt is, however, you’ll need to consider a few things very carefully before taking out credit, as it is a big commitment which can severely affect your future if things go wrong.

What’s your credit score like?

Looking at your credit rating is an important first step, as this will give you the benchmark upon which you can work out what you’ll be eligible for. For instance, if you have a bad credit score, then it’s unlikely that you’ll be approved for a very low rate bank loan. On the flip side, if you have a high credit rating, then you shouldn’t really need to apply for a very high interest short-term loan, as you could get a much better deal from a bank, supermarket or credit card. Checking your score beforehand can give you a good idea about where you stand.

Do you really need to borrow money?

Consider whether you really need to take on debt or whether you’re just doing it because it’s become ‘normalised’. Is the thing you want the money for worthwhile? Will it benefit you financially in the long run, or are you borrowing in order to spend money on something which is wasteful or reckless? Consider paying for this thing for months or years down the line. Will it seem worth it in 6 months?Will you still be happy to pay for it in a year’s time?

Can you get the credit cheaper elsewhere?

You may have already found the lender that you want to go with, but have you taken the time to see if you can get your credit elsewhere at a cheaper price? You may not find it cheaper APR-wise, but another lender could cut out some of the extra costs or even allow you to tailor your borrowing amount more to your needs.

Are you happy to owe money for this amount of time?

Depending on how much you borrow, you’ll have a choice of repayment terms. This could be years if you’re borrowing a lot of money, so it’s very important to think about where you’re likely to be a couple of years down the line. You’ll be tied into paying the instalments for this time, so if you have plans to leave your current job and travel in the next year or so, then borrowing may not be such a good idea.